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Wiley IFRS: Practical Implementation Guide and Workbook
5. MEASUREMENT
5.1 Initial Measurement
5.1.1
If
an entity's accounting policy results in the recognition of an exploration and evaluation
asset, IFRS 6 requires the entity to measure the asset initially at cost.
5.1.2 An entity is required to determine a policy that specifies which expenditures are recognized
as part of the cost of exploration and evaluation assets. That policy should consider the degree to
which the expenditure can be associated with finding specific mineral resources.
Examples
Expenditures that according to an entity's policy might be recognized as exploration and evaluation
assets include expenditures for
• Acquisition of rights to explore
• Topographical, geological, geochemical, and geophysical studies
• Exploratory drilling
• Trenching
• Sampling
• Activities in relation to evaluating the technical feasibility and commercial viability of
extracting a mineral resource
In some cases, general and administrative and overhead costs directly attributable to exploration
and evaluation activities might also qualify for recognition as exploration and evaluation assets.
5.1.3 Expenditures related to the development of mineral resources (i.e., preparations for com–
mercial production, such as building roads and tunnels) cannot be recognized as an exploration and
evaluation asset. Property, plant, and equipment used to develop or maintain exploration or evalua–
tion assets also cannot be recognized as an exploration and evaluation asset.
5.2 Classification
An entity classifies an exploration or evaluation asset as either a tangible asset or an intangible as–
set according to the nature of the asset.
Examples
Vehicles and drilling rigs would be classified as tangible assets. Drilling rights would be classified
as intangible assets.
5.3 Subsequent Measurement
5.3.1 After initial recognition, an entity applies one of two measurement models to exploration
and evaluation assets:
(l)
The cost model
(2) The revaluation model
5.3.2 Exploration and evaluation assets that are classified as tangible assets are measured in ac–
cordance with lAS 16. Those that are classified as intangible assets are measured in accordance
with lAS 38.
6. IMPAIRMENT
6.1 Because of the difficulties in obtaining the information necessary to estimate future cash
flows of exploration and evaluation assets , IFRS 6 modifies the requirements of lAS 36 regarding
the circumstances in which exploration and evaluation assets are required to be assessed for im–
pairment.
6.2 IFRS 6 requires exploration and evaluation assets to be assessed for impairment when facts
and circumstances suggest that the carrying amount of an exploration and evaluation asset may
exceed its recoverable amount. Facts or circumstances that may indicate that impairment testing is
required include
• The period for which the entity has the right to explore in the specific area has expired or is
expected to expire in the near future, unless the right is expected to be renewed.